Changes in India's Patent Law and its Repercussions on the Global Drug Industry India is among the world's top five drug producers in terms of volume, though its $7 billion market does not rank as high in value.1 Prices are low because of the profusion of generic drug makers and the competition among them - made possible through the old Patents Act of 1970. The procedure for obtaining a patent in India, and matters connected therewith are detailed in the Patents Act 1970 and Patent Rules framed thereunder.2 The Patents Act 1970 is modeled substantially on the U.K. Patents Act of 1949.3 The basic concepts of this law in India and U.K. being the same, the decisions of English Courts along with leading English authorities on the subject are often cited by lawyers and Judges alike in the interpretation of some of the provisions of the Indian Act. Not surprisingly, even decisions of Commonwealth Countries have persuasive value in Indian courts. The Old Law The Act of 1970 defines an invention as follows: Invention means any new and useful (i) art, process, method or manner of manufacture, (ii) machine, apparatus or other article, (iii) substance produced by manufacture, and includes any new and useful improvement of any of them, and an alleged invention.4 Indian courts have held that a method or process is a "manufacture" if it (1) results in the production of some vendible product, or (2) improves, or restores to its former condition a vendible product, or (3) has the effect of preserving from deterioration some vendible products to which it is applied.5 Before 1970, India's patent laws, like many others, were derived from its colonial days resulting into some of the world's highest drug prices. However, by 1970, India, along with other developing countries had adopted "process patenting regime".6 The Act of 1970 by granting "process patents" on drugs in combination with extensive use of fertilizers and pesticides not only led to low drug prices but also extended life expectancy and ended regular famines. In order to appreciate the gravity of the amendment and its repercussions on the international drug industry it is imperative to understand the difference between "product patents" and "process patents". Process patenting implies the patenting of the method of manufacturing a product. Under the Indian Patents Act of 1970, process patenting was provided for. Aside from the fact that India has surplus flow of relatively cheap labor, it also has a long tradition of manufacturing drugs of various types. This resulted into several new techniques of making drugs cheaply. After the product has been manufactured with the patented process, it would then be known as patented product in patented in a country adhering to process patenting, such as India. Any other manufacturer cannot produce a product by the patented process, although the manufacturer can produce it by another process. Thus, patenting a product assumes a slightly different complexion from the patenting of a process. The Act of 1970 stated that with regard to medicine or drug and certain classes of chemicals no patent is granted for the substance itself even if new, but a process of manufacturing the substance is patentable.7 Therefore, with respect to food, medicine or drugs, patents were granted only for the process of manufacture of the substance but not for the substance itself. Such restrictions on the grant of product patents do not exist in virtually any other country. All Western countries grant "product patents" on new inventions - i.e. the patent is granted for the substance itself. However, since 1970, India has granted "process patents," which allow another inventor to patent the same product as long as it was created by a "novel process". In pharmaceutical industry, it could mean that a tiny tweak in the synthesis of a molecule yields a new patent. Several companies can produce the same drug, creating competition that drives down prices and puts multinational corporations that spend millions of dollars in research and development at a serious disadvantage. The old patent system allowed Indian pharmaceutical companies to copy drugs patented abroad by merely changing their manufacturing process. This served two purposes: one, it kept cost of drugs inexpensive in India; two, it also allowed a local pharmaceutical company to thrive which otherwise would have faced multi-million dollars lawsuit for patent infringement. By copying drugs other companies spent millions of dollars to develop, Indian pharmaceuticals companies could sell them at as little as one-tenth their original prices. The 2005 Amendments to the Old Law It is widely believed that the 2005 amendments8 were made mainly due to international pressure, as the World Trade Organization ("WTO") demanded that India observe international drug patents. In 1995, the WTO's Trade-related Intellectual Property Rights (TRIPS) agreement was reached in Marrakesh, Morocco, where India, along with many other countries, agreed to grant 20-year patents on pharmaceutical products from January 1, 2005. The new WTO regime effectively outlawed the generic production of new medicines. In March 2005, India's Parliament approved patent regulations to stop local drug makers from copying new drugs developed by other, primarily Western companies. The new law, amending India's 1970 Patent Act, affects everything from electronics to software to medicines, and has been expected for years as a condition for India to join the World Trade Organization. Previously, companies could copy drugs discovered or invented by other companies by tweaking the processes used to make them. As an executive of a leading Indian company puts it: "The winner used to be the guy who could copy faster. Now that has completely changed so that companies that don't innovate will die, especially in the pharmaceutical industry".9 The new patent system recognizes registered original drugs as products no matter how they are produced, thus making it illegal to copy drugs still under patent. Also, it appears that the 2005 amendments have done away with the practice of "evergreening" of pharmaceutical patents, where patent owners allegedly try to extend patent life through grant of new patents by minor "innovations" or improvements on formulations, dosage forms or minor chemical variations of an earlier patented product. However, the new law10 also makes it clear that any invention that enhances the known efficacy of the substance or results in a new product or employs at least one new reactant is patentable and that only the mere discovery of a new form or of any new property or new use of a known substance or process is excluded. It may not be too difficult to prove that the improved dosage form is more efficacious or that one new reactant is involved in the known process to make the product.11 These amendments to India's patent law have sparked worries that Indian companies will face tough global competition, and that the cost of medicines would jump in poor countries now supplied by Indian generic drugs. Since 2000, the gathering momentum of the global popular outrage against a tighter patent regime has become a powerful countervailing force due to emergence of the AIDS crisis.12 Many international aid organizations use inexpensive Indian generic drugs to save money as they save lives. For example, India is a big supplier of low-price generic versions of drugs for treating AIDS. In Africa, exports by Indian companies, especially Cipla and Ranbaxy Laboratories, helped drive the annual price of antiretroviral treatment down from $15,000 per patient a decade ago to about $200 now. Though the new patent law is not as restrictive as many feared and won't dry up supply of today's generic AIDS drugs, international organizations worry that the need to pay royalties or get licenses may constrict supplies of new drugs. All generic drugs could have been removed from the market. However, all the generic drugs already approved in India can still be sold, though sellers must pay licensing fees.13 Nonetheless, many of India's innovative companies14 have welcomed the stronger patent protections saying that these changes have made India more competitive on global scale and will trigger further investment and innovation in India.15 It is expected that with the stronger patent protection, more multinational corporations will tap India's relatively inexpensive engineers, scientists and computer programmers for product design, drug development and clinical testing. In fact, multinational corporations such as General Motors Corp., Microsoft Corp. and Nokia Corp. already have research facilities in India. Financial and country analysts expect the research- outsourcing industry to grow to more than $10 billion globally in the next five years.16 As India opens its markets and its companies venture abroad, companies are seeking to ensure that they profit from their own innovations. The list of top applicants in 2004 shows the importance of patents in global competition. Among the top applicants are Sony Corp, Procter & Gamble Co. and DaimlerChrysler AG - all with more than 300 applications each last year. From the Indian side, the top applicants include Dr. Reddy's Laboratories Ltd. and Ranbaxy Laboratories Ltd. - both have more than doubled their research-and-development spending to about 10% of revenue. 17 Nicholas Piramal, a generics company based in Mumbai, India, has invested $100 million in research and development in the last couple of years. India's generic drug companies, which until now made money copying best-selling foreign drugs, has now increased spending on research with an eye to launch low-cost drugs for the global market. As Dr. Swati Piramal, director for strategic alliances and communications of Nicholas Piramal says: "If an Indian company makes a drug whose development costs are under $50 million, compared with a billion-dollar-plus development costs in the West, we will be able to change the paradigm of drug discovery."18 Ambiguities in the New Law The 2005 amendments to the patent law have many ambiguities that need to be addressed. To illustrate a few: under the new law, a maker of generics can apply to copy a patented drug, but only after it has been marketed for three years. The generic's maker however must pay a "reasonable" royalty. The new law does not define what can be considered to be "reasonable". This can result into unwarranted complications and needless litigation.19 Further, the amendments have sparked fears that with the new law, prices on patented breakthrough drugs would most likely rise to nearly the level in the United States, while prices on more commonly used drugs would most likely rise only moderately. The Indian government has said it would step in if price rises were excessive but has not said how that would be determined.20 In fact, the new law bars the government from over-riding any patent for at least three years - a provision not required under the TRIPS Agreement. Further, the new law states that the Controller of Patents has a series of wide-ranging discretionary powers to determine all kind of criteria like "reasonable affordability," "reasonable pricing," and "reasonable royalty."21 As Subbaraman Ramkrishna, senior director for corporate affairs at Pfizer India Ltd. noted, the word "reasonable" appears 42 times in the bill, giving the impression that royalty rates would be imposed subjectively.22 Lastly, with the removal of Section 5 of the law, it is not clear if chemical processes continue to be defined to include biochemical, biotechnical and microbiological processes.23 Conclusion The amendments made to the patent law by India have been ostensibly to comply with its WTO obligations on intellectual property, the amended law represents a compromise between opposing interests. This compromise has resulted in a complicated and confused law with potential negative consequences that could have been avoided. The new law at times seems to exceed the requirements of the Agreement on TRIPS, or has provisions unique to India, and at other times, appears to be in conflict with the TRIPS Agreement. It is also believed that India, ironically, has swung from one extreme to another, moving from 1970 law that was clearly anti-patent to a law that is pro-patent applicant but not necessarily pro-innovation.24 At a time when there is increasing skepticism around the world over the patent-system as it has evolved so far, particularly in the U.S.25, it remains to be seen whether the hybrid Indian patent-system stands the true test of time. "The works of founders of states, law givers, tyrant destroyers and heroes cover but narrow spaces, and endure but for a little time, while the work of the inventor though of less pomp is felt everywhere and lasts forever".26 Novartis case: background and update – Supreme Court of India to recommence hearing September 6, 2011 Archived No comments A+ | a- Novartis case: background and update – Supreme Court of India to recommence hearing 5 September 2011, New Delhi. Tomorrow, a Division Bench of the Supreme Court of India, comprising Justice Dalveer Bhandari and Justice Deepak Verma, will re-commence the hearing of Novartis AG’s (Novartis’) challenge to the order of the Intellectual Property Appellate Board (IPAB) rejecting its patent application for Gleevec (beta crystalline form of imatinib mesylate), an anti-cancer drug used to treat chronic myeloid leukemia. The outcome of this case will affect not only the patenting of this particular anti-cancer drug, but will also determine the position in India on patenting of new forms of already known drugs. Novartis has challenged the IPAB’s interpretation of section 3(d) of India’s patent law and its application to Novartis’ patent application for the beta-crystalline form of an already known substance, imatinib mesylate. Section 3(d) of the Patents Act is the public health safeguard in the Indian patent law that, amongst others, disallows patenting of new forms of known substances, unless the new form exhibits a significant enhancement in efficacy. It is one of the safeguards introduced by Parliament of India in 2005 to prevent evergreening. Evergreening is the practice of pharmaceutical companies to obtain patents on frivolous or minor changes to known drugs and thereby establish or extend their monopoly over a drug. Due to the keen interest both domestically and internationally on this case, Lawyers Collective HIV/AIDS Unit, representing Cancer Patients Aid Association (CPAA) in these matters, will provide daily updates on the progress of the case. The reports will be factual updates without any comments as that is not permissible under Indian law relating to contempt. This initial posting will provide a brief factual and legal background leading up to the case. Brief background In 1997, Novartis AG, a pharmaceutical company based in Switzerland, filed a patent application in the Chennai (Madras) Patent Controller’s office for the beta-crystalline of imatinib mesylate, brand name Glivec (Gleevec) on the ground that it invented the beta crystalline salt form (imatinib mesylate) of the free base, imatinib. Novartis’ patent application was kept in the mail-box and not opened until 2005 as the TRIPS Agreement permitted developing countries such as India that did not provide product patent protection to pharmaceuticals and agrochemicals to introduce such product patent protection from 1 January 2005. In the meantime, Novartis had obtained Exclusive Marketing Rights (EMR) for marketing Gleevec in India. On the basis of this, it obtained orders preventing some of the generic manufacturers from manufacturing and selling generic versions of the medicine. At that time, Novartis was selling Gleevec at USD 2666 per patient per month. Generic companies were selling their generic versions at USD 177 to 266 per patient per month. In 2005, India amended its patent law to comply with its obligations under the TRIPS Agreement to provide process and product patent protection in all fields of technology, including pharmaceuticals and agrochemicals. Cognisant of patenting practices, Parliament introduced a significant and important provision to prevent evergreening and granting of frivolous patents— section 3(d). After the 2005 amendment to the patent law, CPAA and other generic companies filed pre-grant oppositions against Novartis’ patent application for imatinib mesylate, claiming, among other things, that Novartis’ alleged “invention” lacked novelty, was obvious to a person skilled in the art, and that it was merely a “new form” of a “known substance” that did not enhance the substance’s efficacy, and was thus not patentable under section 3(d). These arguments were based on the fact that Novartis had already been granted a patent in 1993 in the United States and other jurisdictions for the active molecule, imatinib, and that the present application only concerned a specific crystalline form of the salt form of that compound. CPAA and the generic companies contended that the 1993 patent effectively disclosed both the free base, imatinib, and the acid-addition salt, imatinib mesylate. Further, CPAA and generic companies argued that different crystalline forms of imatinib mesylate did not differ in properties with respect to efficacy, and thus the various forms of imatinib mesylate must be considered the “same substance” under section 3(d). Novartis’ patent application rejected by Patent Controller [January 2006] In January 2006, the Patent Controller in Chennai, in a landmark decision, refused to grant Novartis a patent, agreeing, amongst others, with the contentions of the CPAA and generic companies that the subject application lacked novelty, was obvious, and was not patentable under section 3(d). The patent rejection meant that generic companies could manufacture and market their generic versions of the drug, both in India and abroad, and make available the generic imatinib mesylate priced at less than one-tenth of Novartis’ price. In June 2006, Novartis AG and its Indian subsidiary, Novartis India, filed a series of writ petitions against the Government of India, CPAA, and four Indian generic manufacturers (Natco, Cipla, Hetero and Ranbaxy), before the Madras High Court. These writ petitions challenged the decision of the Patent Controller to refuse to grant Novartis a patent for the beta-crystalline form of its anticancer drug, imatinib mesylate, as well as the validity of section 3(d) that provided one of several grounds for rejecting its patent application. Over a period of time, the writ petitions challenging the decision of the Patent Controller were converted into statutory appeals. In April 2007, the Government of India notified the IPAB to hear appeals relating to patents. Consequently, Novartis’ appeals were transferred to the IPAB, a specialist tribunal on matters relating to intellectual property. Constitutional validity of section 3(d) upheld by Madras High Court [August 2007] Meanwhile, in August 2007, the Madras High Court issued its decision rejecting Novartis’ writ petitions challenging the validity of section 3(d). The Madras High Court refused to examine whether section 3(d) was in compliance with the TRIPS Agreement. Novartis’ primary contention in its challenge to the constitutional validity of section 3(d) was that the use of the term “efficacy” in section 3(d) is vague and ambiguous, and therefore violates the equality provision (Article 14) of the Indian Constitution. During the arguments, while conceding that the meaning of the term “efficacy” is known, Novartis contended that because there was no clarity as to what constituted “enhancement of efficacy” and “significant enhancement of efficacy” as required by section 3(d), the law was vague and lent itself to arbitrary decisions by the Patent Controller. The Government of India, CPAA and generic companies argued that section 3(d) is not in violation of the equality provision of the Indian Constitution as the concept of efficacy is well-known to persons in the pharmaceutical industry and it is impossible to lay down a “one size fits all” standard to determine what constitutes a significant enhancement of efficacy. Dismissing the petition, the Madras High Court held that section 3(d) was not vague or arbitrary and therefore did not violate the Indian Constitution. It held that the term “efficacy” was known in the pharmaceutical field to mean “therapeutic efficacy”. While dismissing Novartis’ writ petitions, the Madras High Court held: “We have borne in mind the object which the Amending Act wanted to achieve namely, to prevent evergreening; to provide easy access to the citizens of this country to life saving drugs and to discharge their Constitutional obligation of providing good health care to it’s citizens.” Novartis AG did not challenge the judgment of the Madras High Court upholding the constitutional validity of section 3(d). Appeal on merits rejected on the ground of section 3(d) [June 2009] The next round of litigation then commenced before the IPAB. After a series of litigation in which Novartis contested the constitution of the IPAB, Novartis’ appeal challenging the Patent Controller’s order was finally heard by a specially constituted Bench of the IPAB, comprising Justice Negi (Chairperson) and Dr PC Chakraborty (Technical Member) in November and December 2008. In its decision issued in June 2009, the IPAB overturned the Patent Controller’s findings on novelty and inventive step and held that the beta-crystalline form of imatinib mesylate was new and involved an inventive step. However, the IPAB held that Novartis’ alleged invention did not satisfy the test of section 3(d) in as much as Novartis did not provide data to show that the beta-crystalline form of imatinib mesylate exhibited significantly enhanced therapeutic efficacy over imatinib mesylate, the known substance. Primarily on the basis of this finding, the IPAB rejected Novartis’ appeal and refused to grant it a patent for the beta-crystalline form of imatinib mesylate. Proceedings before the Supreme Court Challenging the IPAB’s order, Novartis approached the Supreme Court directly by filing a special leave petition challenging the IPAB’s interpretation and application of section 3(d) to its patent application. Subsequently, CPAA and Natco filed cross-petitions challenging the IPAB’s findings on other issues including novelty and inventive step. On 9 August 2011, the Supreme Court of India commenced final hearing of these matters. Relying on the IPAB’s findings that Novartis’ patent application satisfied the tests of novelty and inventive step, Novartis is now challenging the IPAB’s finding on section 3(d). Its argument is that section 3(d) that relates to “discoveries” is inapplicable to its patent application which, having satisfied the criteria of novelty, inventive step and industrial application, is an “invention” under the Indian patent law. [Section 2(1)(j) of the Patents Act defines “invention” to mean “a new product or process involving an inventive step and capable of industrial application”.] Appearing for Novartis, Mr. Tehmtan R. Andhyarujina, Senior Counsel, urged that once it was established that the beta-crystalline form of imatimib mesylate was an “invention”, section 3(d) could not have been applied by the IPAB to reject Novartis’ patent application. He said that the IPAB’s holding indicated a complete non-application of mind in as much it held the beta-crystalline form of imatinib mesylate to be an invention and then applied section 3(d)—a provision relating to discoveries—to refuse to grant a patent to Novartis’ invention’. Disputing the IPAB’s holding that the term “efficacy” in section 3(d) means therapeutic efficacy, Mr. Andhyarujina argued that the IPAB erroneously relied on the Madras High Court’s interpretation of the term “efficacy” to mean therapeutic efficacy in the pharmaceutical field. Referring to the IPAB’s finding that the term “efficacy” meant therapeutic effect in the pharmaceutical field and improved power of producing an effect in other fields, he urged that one term in the statute could not have two different meanings. In any event, he argued that neither imatinib nor imatinib mesylate had therapeutic effect and that it was only the beta-crystalline form of imatinib mesylate that had therapeutic effect. Reiterating Novartis’ pleadings before the IPAB on the interpretation of the term “efficacy”, he argued that improved bioavailability and thermodynamic stability are properties that improved efficacy and that the beta-crystalline form of imatinib mesylate exhibited both these properties. Continuing the arguments for Novartis, Mr. Gopal Subramaniam, Senior Counsel, reiterated Novartis’ proposition distinguishing inventions and discoveries. He argued that the intention of the patent law was to provide patents to inventions. Once a patent applicant had satisfied the Patent Office that its patent application related to an invention as defined by section 2(1)(j) of the Patents Act by satisfying the tests of novelty, inventive step and industrial application, section 3(d) could not be interpreted or applied in a manner to destroy the primary purpose of patent law. He urged that pharmacological innovations must be given utmost protection because they are needed for humanity. Alluding to the patents granted to Novartis in numerous other jurisdictions for the exact same application, he argued that using section 3(d) to disallow patents for inventions would sound the death knell for patents and affect research and development for the entire sector. Referring to the terms “discovery” and “invention” used in section 3, Gopal Subramaniam relied on several documents to establish the difference between “discovery” (bringing to light something that existed before but was not known) and “invention” (creation of something that did not exist). He then argued that section 3(d) could apply only where the substance was already in existence and was subsequently discovered, but not to inventions of new substances, as in the case of Gleevec. Pointing out that section 3(d) required a comparison of known efficacies of the known substance and the new form of the known substance, Mr. Gopal Subramaniam argued that section 3(d) could only be applied if the efficacy of the known substance (imatinib) was already known. Referring to the IPAB’s finding that efficacy means therapeutic effect / efficacy, he said that clinical trials were necessary to establish therapeutic effect / efficacy. He urged that given that such efficacy had never been established for imatinib, it was not possible to demonstrate enhanced efficacy of the beta-crystalline form of imatinib mesylate over the efficacy of imatinib. In such a situation, he argued that section 3(d) could not have been relied upon to reject Novartis’ patent application. On 11 August 2011, after hearing the arguments till forenoon, the Supreme Court adjourned the matters to 6 September 2011 for further hearing.
